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October 05, 2009

The Nirvana Fallacy: The Best is the Enemy of Good Thinking

I was struck last
weekend by the frequency of coincidence. I was working on the curriculum for my
course in Risk Analysis – trying as always to stay a jump ahead of a class of
smart, inquisitive MBA students.

This time it was
the recurring observation of a common defect in logic and reasoning, named the
“Nirvana Fallacy”: the lapse into error of comparing a defective or sub-optimal
situation against an idealized or perfect state – failing to recognize that the
assumed achievement of perfection is impossible in a world of flaws, limits and
constraints.

Thanks to my
colleague who identified a relevant example of this common behavioral trait:
United States Senator Charles Schumer (D-NY), arguing for a legislative program
to address the shortcomings in the regulation of the financial institutions by
whom the capital markets have lately been served so poorly.

Falling into the
fallacy, the good Senator advanced an argument that assumed an ideal state of
affairs: “You need a tough, strong regulator – unified – no holes in the system
---…who sees the problem ahead of time, so they have complete transparency,
they know exactly what’s going on….”[i]

The problem is,
Senator Schumer was assuming two impossible aspects of his end state – the
availability of an inaccessibly complex body of information on a timely basis,
and omniscient regulators free of their manifestly inherent limitations in
talent, vision and authority.

Suddenly, I was
seeing examples of the Nirvana Fallacy everywhere.

There was the
football coach, asked in a pre-game interview about his losing streak, who
claimed that, “all we need to turn ourselves around is to sharpen our execution
and carry out our game plan.” As the Saturday afternoon results shortly proved,
his sunny recipe for redemption of a rapidly fading season failed to
acknowledge that his team was fundamentally smaller, slower and less well
coached than his opponent.

The Sunday morning
television pundits were equally circular in arguing perfected solutions to
complex diplomatic challenges. “We accomplish our mission in Afghanistan by
disabling the capacity of the Taliban” – a proposition that mistakenly assumes
its own conclusion, in the face of centuries of history in which no foreign
influence has prevailed in that region.

Or the debaters on
the challenging issue of American health care reform, who mouth their competing
platitudes of “no government takeover” and “low cost coverage for every single
citizen,” while resisting the hard work of reconciling deep and intractable
opposing forces and ideological differences.

Or the bureaucrats
in India, proposing that the government’s Serious Fraud Investigation Office
could effectively probe corporate frauds, if only given power to seize
documents and conduct interrogations (here) – while walking right past the
plain fact, made stark by the blind-side emergence last winter of the Satyam
scandal, that mature, sophisticated securities oversight in India is today no
more than a figment of regulatory imagination.

As I try to help my
students and my clients alike to become better at identifying and avoiding the
traps and sources of bias and error in their decision-making, the Nirvana
Fallacy deserves a place of prominent scrutiny and recognition – although it
does suffer the dual handicaps of a miserable launching pad and the need for a
comprehensible introduction into the area of public discourse.

Completeness
obliges identification of the original source – footnoted below.[ii]
In good conscience, however, I do not recommend anyone’s diversion of energy
into looking there for help. Time spent in academic and scholarly journals can
be hazardous to one’s health; as the quoted excerpt shows, those periodicals
are the place where simple, lucid writing goes to die.

My students can
expect a homework assignment on the Nirvana Fallacy: identify and discuss an
illustrative scenario, from work or personal experience or the worlds of
political or economic activity. I will expect examples ranging from fancifully
assumed cost savings in proposed corporate mergers, to campaign pledges of
government largesse free of any of tax increases – or from rejection of a
weight-loss plan as too little to be effective, to over-confidence in
Sarbanes/Oxley as the cure for all executive venality and excess.

Similar examination
of the flaws in the promises and arguments of public debate would benefit us
all.

[i]See Sheldon Richman's April 2009 article at the Foundation for Economic Education.

“The view that now pervades much public
policy economics implicitly presents the relevant choice as between an ideal
norm and an existing ‘imperfect’ institutional arrangement. This nirvana
approach differs considerably from a comparative institution approach in which
the relevant choice is between alternative real institutional arrangements.”

Compare this with Voltaire,
who needed only the six words borrowed for the title of this piece: “Le mieux est l’ennemi du bien.”

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